Investing in Real Estate with Heebner

After all the recent real estate news, I have decided it is time to go into the sector.

Here is the thing. I lack the ability to properly value a builder (so do they it appears from recent results) and most of us investors do not have the access to some of the more esoteric products out there that can provide superior returns. When that happens, it is time to look at someone who does.

I am going with Ken Heebner at Capital Growth Management (CGM) and his CGM Realty Fund (CGMRX)

From the prospectus

Definition
A company is considered to be in the real estate industry if construction, ownership, management, financing or sales of residential, commercial or industrial real estate account for at least 50% of its gross revenues or net profits. Companies in the real estate industry include the following:
• REITs that own properties or make or invest in construction, development or long-term mortgage loans;
• housing and building materials companies;
• real estate brokers or developers; and
• companies with significant real estate holdings, including hotel chains and mining, lumber and paper companies.

Management Style.
Rather than following a particular style, the Fund’s investment manager employs a flexible approach and seeks to take advantage of opportunities as they arise. In making
an investment decision, the Fund’s investment manager will generally employ the following method:
• it uses a top-down approach, meaning that it first analyzes the overall economic factors that may affect sectors of the real estate industry and potential investments;
• it then conducts a thorough analysis of certain realty industries and companies that the investment manager believes have stable or improving prospects, evaluating the fundamentals of each on a case-by-case basis and focusing on companies that it determines are attractively valued based on price to earnings ratios and growth rates;
• the investment manager will sell a security if it determines that its investment expectations are not being met, better opportunities are available, or its price objective has been attained.

Portfolio Turnover.
The Fund’s objective is to provide a combination of income and long-term of capital and the Fund does not purchase securities with the intention of engaging in short term
trading. The Fund will, however, sell any particular security and reinvest proceeds when it is deemed prudent by the Fund’s investment manager, regardless of the length of the holding period.

Additional Information
The Fund may invest up to 20% of its total assets in debt or fixed-income securities of a quality below investment grade (i.e., securities rated lower than Baa by Moody’s Investors Service, Inc. (‘‘Moody’s’’) or lower than BBB by Standard & Poor’s Ratings Services (‘‘S&P’’), or their equivalent as determined by the investment manager)

These may include securities commonly referred to as ‘‘junk bonds’’. Investing in junk
bonds is an aggressive approach to income investing. The Fund may also invest up to 20% of its assets in repurchase agreements, by which the Fund buys securities with the understanding that the seller will buy them back with interest at a later date.

Heebner has a 38% annual return the last 5 years during both up and down real estate markets. The funds expense ration is .9% and has a $2500 minimum or $1,000 for IRA’s.

Disclosure (“none” means no position):Long CGMRX

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